Jeffrey Sachs on Obama and discretionary spending

…the surprising truth is that from the start of his presidency Mr Obama has planned a steep decrease in discretionary spending as a share of national income.

Each year he has put a budget on the table. Each year that budget has called for a sharp decline in discretionary spending as a share of gross domestic product in 2012 and later years. His rhetoric about increasing public investments in America’s future has always been contrary to the budgets he has presented, though most of his supporters have been unaware of this contradiction.

The administration is now vigorously blaming the Republicans for the pending cuts. Yet the level of spending for fiscal year 2013 under the sequestration will be nearly the same as Mr Obama called for in the draft budget he presented in mid-2012. In fact, so deep were the proposed cuts in discretionary spending that the budget narrative made the surprising point that the president’s plan would “bring domestic discretionary spending to its lowest level as a share of the economy since the Eisenhower administration”.

Here is more.


so, O has Harry Reid to blame? After all, these budgets got exactly zero votes in the Senate; no R votes, and no D votes.

The vote was 99-0 against.

Those budgets were political theater not designed to pass.

If the senate wont vote on a budget brought the the house, and it voted no on a budget proposed by Obama.... what does it take to get a budget passed then?

I don't know the answer but someone should show some leadership here work something out. a budget (NOT a CR) has only been based one time in the past 4 years.

If it is theater, it is awfully conservative theater. It isn't high speed trains to every doorstep. This despite the insanity of the conservative narrative, that every proposal is a gateway to statism at best and socialism most likely.

The high speed rail line to your front door begins and ends between a prison and a cactus plant in the California desert -- at a cost of billion$.

Good metaphor.

The Obama Presidency is a high speed train headed straight for your front door.

It's train wreck, and what gets wrecked is you.

What fraction of the deficit is in fact high speed rail funding?

I'll answer my own question. "As of Nov. 2011, a total of $10.1 billion in federal funds had been provided so far to 32 states and D.C. for high-speed and intercity passenger rail; of that, more than $7.6 billion had been obligated." Jeebus. Get over yourselves.

I will answer your question, John.

Too much.

The real answer is if you gave me 1% of that I'd research evacuated tube transport and do something real. Alternatives. And you brought up the rail. I've never said it was a big deal in absolute numbers, but it is a signal as a concept.
"Researchers at Southwest Jiaotong University in China are developing (in 2010) a vactrain to reach speeds of 1,000 km/h (620 mph). They say the technology can be put into operation in 10 years."

Further evidence that our government simply doesn't do its job anymore. When someone doesn't do their job, you don't get mad, you just take it away from them and see if someone else can do it.

There seem to be only two types of government spending in America today: spending that is tiny and insignificant and therefore should not be cut; and spending that is huge and significant and therefore should not be cut.

these comments just feed the dumb blame game that mires our politicians in sludge without making any coherent view of the future. for a rational response to the sequester and impending shutdown, check out this article:

If this is what The Won wanted all along, what's the problem? Why can't we all be friends?

Careful. You may undermine some people's faith and alert them to reality.

You mean the part about Obama passing budgets that are at the same level of spending as the budget will be after the sequester? And yet the President is attempting to Demonize the GOP for not stopping the sequester, an idea his office apparently proposed and they agreed to and the Democrats in Congress signed off on.

I must admit, I have a hard time believing it all.

You've heard of politics, right? Both sides are busy playing it, wanting the other side to look bad so they will cave.

Also, you're aware that you can spend the same amount with different priorities, and those priorities can make a big difference, right?

Finally, what do you mean to imply with the "the president proposed?" What difference does it make who proposed it? No one proposed it as their plan to change the budget. Everyone recognized it as an attempt to create incentives to find a compromise, because no one liked the cuts in the package.

"Finally, what do you mean to imply with the “the president proposed?”

I'm not sure what is confusing about the statement.

I see Tyler has no need to fear reality intruding on your bubble. I'm sure he's relieved.

The GOP put a gun to the country's head in 2011. Obama proposed the sequester as way to prevent them pulling the trigger until after the election. It worked.

You can come on here and rail about what a socialist he is, but in politics all that matters is who wins. Right now my money is on Obama. This is just a repeat of 1995 when Newt Gingrich tried something similar.

I could be wrong, but it seems to me that this is just more evidence that the GOP leadership is good at stirring up resentment in its base, but terrible at actual governance.

Just keep saying "reality" "facts" and "bubble" over and over again and you'll eventually win.

This is pathetic, Adam, trying to claim that a basic statement of facts means one is impervious to reality, without even the most tenuous connection to an untruth.

You mean the part about how many of the administration's legislative proposals aren't included in the official budget submissions? Or the part about how all of these budgets came after the ARRA (stimulus) and bailouts, and thus only look good compared to an absurdly high baseline? Or is it the part about how the hedge word "discretionary" specifically excludes 90% of the budget? Or the part about how much of the costs of his proposals (from PPACA to EPA regulations) keep most of their financial impacts well off the federal budget?

Reality, indeed.

I think the point Sachs, and perhaps Tyler, is making is that Obama is not much of a progressive Democrat or liberal, at least on economic issues, as most of us New Deal Democrats have known since 2007-08. He very much comes from and is comfortable with Rubin wing of the party, who are mostly Eisenhower/Rockerfeller Republicans who were left homeless by the Republican Party's conversion into the Confederate Party (you really should use the Stars and Bars as your symbol). I would point out that the Bailouts, though implemented in the most bank friendly way as possible by Obama and Geithner, were actually enacted and signed into law by a Democratic House (but with Republican votes), a Republican Senate, and a Republican President, some forgotten guy named Bush.

I know you will never acknowledge how deep and catastrophic the 2007-09 recession was, and that it was the deepness of that recession and the resulting loss revenue and automated counter-cyclical spending that has created most of the recent deficit. I know none of you will simply recognize that as matter of logic and arithmetic per the National Income Accounting Identity that as long as the U.S. is running large trade and current account deficits it will have to run large Government deficits if private saving is to return to its historical level (in 2004-6 private saving went into deficit, even as Bush was running a Government deficit in a boom, and none of you clowns said anything, I know, I know IOKIYR) to have any economic growth and increase in employment. GDP = consumption + investment + (government spending) + (exports − imports)

By the way the whole point of ARRA stimulus was that it was to be a temporary program to halt and reverse the downturn. At the time the claim was made that it was all intended to be permanent spending. I guess the joke was on us liberals.

By the way, the Ryan budget and Republicans have "zero" interest in cutting current spending on Social Security and Medicare (what you guys snarl are "entitlement" programs). That is their base.

I'm not particularly moved by this argument. When you look at discretionary spending as a % of GDP, we were at roughly 3% in 1996 and that's about where we are today. The President has cut discretionary spending - but you have to take into account the American Reinvestment and Recovery Act/economic bailout which was a spike in discretionary spending in 2009. (Whether its a "huge" spike is an entirely separate question with Keynesian undertones this poster wishes to avoid... Its sufficient to say that it was a spike).

Moreover, the general decline in discretionary spending is a trend that started well before Obama was elected. It has ranged upwards of 5.5% of GDP during the Carter administration While it may be accurate to say he cut discretionary spending, it's a mistake to say that he represents a substantial change from the last 30 years of our American experience.

I would be much more impressed if the President had cut non-discretionary (read: entitlement) spending.

I would direct you to this data from the (mostly) non-partisan Center for Budget and Policy Priorities:

"The President has cut discretionary spending – but you have to take into account the American Reinvestment and Recovery Act/economic bailout which was a spike in discretionary spending in 2009. "

This. Lowering it from a massive spike, isn't lowering it.
Also, "discretionary spending" is a small percent of the budget, and not the part that is likely to continue growing.

So, you are of the view that everything you earn belongs to the government, so the tax cuts and credits in ARRA are all bloated government spending?

And all discretionary spending at that?

That means Bush's tax cuts were massive discretionary spending along with the Reagan tax cut discretionary spending.

And Obama got the AMT indexed so that is more discretionary spending?

And Obama's deficits are smaller than the Ryan budget which cuts entitlements because Republicans cut entitlement spending with gimmick like the change to the Medicare payment formula that they then delay year after year, with the latest doc fix being part of the fiscal cliff deal to prevent a 25-30% cut in doctor payments. Republicans see doctors as being entitled to increased pay at twice the rate of inflation even when all other workers are seeing flat or declining wages.

So... you're saying he did NOT cut discretionary spending, then?

Its all discretionary spending, co gress could cut any part of the budget. Stop peddling political cover stories.

Mulp is weird.

It is starting to become only Nixon could go to China with Obama and government spending. It certainly has more with Republicans and the slow withdraw of Middle East wars than Obama's priorities. But with a lot of political changes, there are always contradictions and a lot more messy than people think it should be. Look at how love there is for Clinton & Gingrich shutting down the government today.

Yep, that is one of the reason's I really did not care who won the election and actually thought Obama might be better even though I generally disagree with him more.

Democrat in WH + Republicans in HOR has been a very good combo when it comes to controlling spending.

I'm increasingly bullish on Obama. Lots of crazy theories and incomplete data yet, but I think his defining self-conception is 'outsider', someone who comes in and brokers a deal.

Combined with a decent head for the art of the possible, and two paths: (a) preside over an acrimonious slide into bankruptcy over the next three years, or (b) put the country on a sound, long-term footing, I'm betting he chooses wisely. The left, of course, will hate him and feel abandoned, until 10 years from now when we look back.

And the right, of course, will hate him no matter what he does, even if it's heavily influenced by their ideas (Obamacare, Simpson Bowles (which I believe is coming in some form), drones, etc)

To this moderate/centrist you're doing something right if both extremes hate you.

i'm curious over your statement, "...preside over an acrimonious slide into bankruptcy over the next three years..."

Is there any factual evidence that leads you to that prediction?

Recipe: Start with $16.4 trillion debt.

Sprinkle on more debt at $1 trillion per year.

Fold in baby-boomer retirement entitlement costs.

Garnish around the edges with a few trillion in unfunded retirement promises to state and local government employees.

Watch interest rates creep up - 1%-2% should be sufficient.

Let stew until 2019.


Come on. This is crap. The only reason these cuts are on the table is because the House is controlled by the GOP. Sure, the sequester was Obama's idea (in that he proposed the compromise) but that was because the GOP was holding a gun to his head on the debt ceiling. If the House were not run by the GOP, none of these cuts would be on the table. Thus, despite the childish finger pointing and the fact that it was indeed the executive that proposed them in the first place, it's obvious, obvious, obvious that the GOP is the party of cutting spending. Obama is a centrist and was willing to make a deal that included spending cuts but to say these cuts are coming about because of him is ridiculous.

But the Republicans are only for cuts because Obama is president, just like in the 90s the Republicans were for cuts because Clinton was president.

If Christie is elected president in 2016, it will be 2001-2006 all over again with no pork barrel spending too excessive and no entitlement increases too costly, and no hike to the debt limit too excessive. If Ryan is elected president in 2016, the deficit will explode with the tax cuts and increased discretionary spending funded by the cuts to entitlements that really kick in around 2040.

Remember, in 1980, the US was spending about 8% of GDP on health care, not that different from the OECD 6-7%, and Reagan and Republicans sought to purge all vestiges of socialism from health care to make health care profit driven free market and totally superior to the socialized medicine in Europe and Asia and Canada. Quickly US health care spending rose rapidly while outcome improvements slowed, and by the end of the 80s US health care was in crisis, leading to the definition of Obamacare by Republicans and the various Democratic proposals including Hillarycare. That led to the Clinton micro reforms of SCHIP and the likes, with the private sector trying to have insurance clerks manage care based on HMOs being just clerks telling doctors what to do because no not-for-profit run by doctors is acceptable because that is socialism.

But by 1999, that finger in the dike holding back the profit seeking failed and profit seeking drove up insurance costs 8-10% annually, doubling insurance premiums in 8 years. And now the US is spending 16-17% of GDP which is over 50% more than the rest of the OECD while outcomes lag the rest of the world after being the overwhelming leader in 1980.

Republicans are totally incapable of controlling spending. There merely control spending as a byproduct of opposing Democratic presidents so they can get a Republican president who will support the Republican pork barrel spending and tax cuts.


Not quite sure I think it's so simple but you are right about republicans being spending frauds. This whole debt scare is a front to disassemble the social spending or a case of being afraid of maybe eventually having brain cancer in the middle of a heart attack.

That's what's upsetting actually. If you are really concerned about long run spending and debt, why not grow a pair and propose changes to the actual problems rather than cut (most everything off the table in the sequester cuts) arbitrarily on things that aren't causing the problem, all the while creating a headwind on the recovery.

Motivies aside, the combo of Democratic President/Republican Congress can actually result in pretty good policy. The only surpluses in living memory came from the Clinton Presidency/Gingrich Congress.

Picture it: Washington, 1999. If G is in surplus, and you have a trade deficit, mustn't either C or I (or both) be in deficit as a matter of Economics 101 in order to fuel GDP growth? I'm not sure $100 billion surpluses are as great as they seem.

No, C and I don't need to be in deficit, if (X-M) is negative. If the country is attractive enough to attract sufficient portfolio inflows and FDI into its world-dominating tech companies.

Wow, stopped clock moment.

The elephant in the room is entitlement spending. Until we reform these, discretionary spending will get crowded out, whether by politics (on both sides) or the bond markets (probably less likely in the near term, but in theory, possible). Of course, we don't have to make hard choices if the economy starts growing at 5+ percent, but the probability of that is quite low, especially with the added regulatory burdens both now and in the near future. This leads us back to the elephant, which is there, and it's not even invisible. The claim that there is disagreement in congress can be refuted by the idea that in fact there is broad consensus to have large entitlements and not pay for them - agreed to by both parties.

Of course. It is so bizarre. The weirdest part is that I'm convinced Sachs believes himself 110%.

What's incorrect about what Sachs said? The fact that he isn't talking about what you want him to talk about is completely besides the point.

Almost every sentence of the excerpt seems incorrect or misleading.

What he said is entirely beside the point. Obviously both houses figured the same thing, because the budgets got few if any votes. It was meaningless political theatre. The real budget problem is the non discretionary spending.

And it's just wrong, or at least it seems to me. I could go through it sentence by sentence, but let's start with the main premise. Were it not for this repeating cluster-f#@% of debt ceilings, sunsetting laws, and Republicans and sequesters all being driven by entitlement crowding out would Obama be ""slashing"" (note the double qoutes) discretionary spending? Of course not. So, his main premise that this is Obama's goal all along is at least misleading. Maybe Obama really is a pure socialist who only wants the government to do wealth transfers, but it certainly isn't a desire to slash spending.

At some point, Democrats are going to have to choose between all those discretionary programs that provide the services they like so much, and entitlements. Right now, they are in denial. And they are selling the public on the idea that they can have both, just by taxing the rich more.

Yes, that sums it up. It's either a broad based tax increase or a significant cut to spending. There's not any other likely path going forward.

I suppose default and/or inflation is possible, but those are just other forms of raising taxes.

This is where we ignore functioning Scandinavian economies, right? Or even functioning Canadian economies? By all means play the game, and name "scary" countries instead, like "France" or "Greece," because you know, models of success don't count. One example to grab the conservative amygdala is all you need.

Scandinavian economies have a lot higher taxes on the middle class does than the US, so no we are not ignoring them.

Sweden has a 25% VAT, for example. On the other hand, Sweden also has a relatively low income tax on the rich. There are three income tax brackets 0, 15 & 25%.

Sorry that should have been: 0, 20%, 25%

>$57K = 20%
>$83K = 25%

If you are going to make a claim like this, you need to cite your sources. The Economist -- citing a study by KPMG -- claims a top marginal rate in Sweden of 56.6% and an effective income tax rate on $100,000 of over 35%:

Sweden also appears to tax capital gains and dividends at 30%.


Don't all of those Scandinavian countries have higher across the board taxes? I know that their tax systems are less progressive than ours and take a higher percentage of GDP.

As both posters above said. You can:
1) Have higher taxes across all income groups
2) You can cut spending.

The Scandinavians have chosen #1

Why on all groups. Why not start with taxes on millionaires. Income tax rates on millionaires have gone from being 75% or higher from 1936-1980 to being some 35ish percent. It's no wonder their incomes have risen 250% over a similar period. Why should it be off the table to even propose a 40-45% tax now. That's like 1/2 to 2/3rds what their millionaire parents or grandparents paid over the most successful period in us history (excluding ww2).

You can "start" with millionaires, but that will get you nowhere, so you will then have to immediately move on to the rest of us. 75% or higher was a joke with all the loopholes, effective rates were much lower and similar to today. By the way, income going up is a GOOD THING.

You do realize that in the days of 75% tax rates on the rich their were all these awesome tax shelters. The oil depreciation allowance for example. Almost nobody paid those taxes.

Sure guys, the successful Scandinavian countries have higher tax and government spending across the board. Why should that not be our end-game?

I'm going to say that it was the Republicans who have argued for decades here that you can have tax rates as low as you want, with no consequences. When that lunacy finally crashes and (rightfully) burns, why wouldn't a little more Nordic solution emerge?

(The MR software should be fairer to typists ... "too fast" ... pfft.)

My memory is failing me, which Democratic politician has been running on a 25% VAT platform? And reducing taxes on the rich to 25%?

Republicans have been preaching that you can set the national tax rate below 20% of GDP, keep all the services you love, and make it up in "waste, fraud, and abuse." You wake up now and say that Democrats should have been even more real? You are arguing that raising taxes on the rich was not enough? Are you and your candidates ready to run on that? If not, the Democratic half-truth is (a) closer to the real truth, and (b) as close as they can sail in a political contest.

Yes, all the politicians are a pack of liars. What is your point exactly?

Services? What services? I was sitting in my car wondering if I'd seen anything from the Federal government that day. You mean wealth transfers. And Republicans haven't been selling what you say. They've just had to live with the reality of the difficulty of winning elections by being the bad messenger. Everything that is happening now is the Democrats now coming to terms with that and trying to yoke the Republicans with the blame and capture the credit.

And I'd also like to see a breakdown on Total government spending and services provided versus European countries. And I'd like to see why their GDP is so low compared to ours.

No, Republicans definitely have not been proposing real cuts to the money munching programs, like Medicare and defense. Nor have they been proposing tax increases. So...the bad message they've been sending is that we have to cut cut cut discretionary programs. This is is the party of trickle down economics.

Of course both the Dems and R's are both to blame for the fiscal situation, but do you think the Dems are really going to let the opposition con them into proposing cuts to the very popular programs that they support in order to balance the budget? How long did it take the R's to come around to supporting Medicare?

Jan, taxes HAVE gone up on the rich: 43.4% in 2013.

The Pentagon is taking half of the sequester cuts, right?

Discretionary cuts- the first test of Democrats giving on anything, and y'all are squealing like stuck pigs and now butthurt that the American people aren't buffaloed by worst.cataclysm.ever. rhetoric.

In terms of groping toward reality, Democrats have been leapfrogged in recent months. Keep up now- the tough talks are just ahead.

Thanks, did the Republicans propose the expiration of the tax cuts on the rich? Nope. Did they propose ending the expiration of the tax cuts to the middle class, where it would have made a real difference for long-term debt? No.

So what's your point? Let't not pretend that R's are ready to make real sacrifices. They're going to be blamed for the sequester and they'll give some ground. They 'll get shamed for being stubborn, dull and kind of crazy. Then they'll show some modicum of compromise and everyone will act like the Dems won.

Now that you mention it, all the functioning economies that you refer to went through gut wrenching cuts and re organization about 20-30 years ago. If only the US would rationalize it's spending like these working countries did.

Obamacare was fought by Republicans because they saw that it would cut entitlement spending. If you are getting government funded health care but want to cut the spending on "them", then you can only do that by cutting your own health care entitlements. The best example is the Republican elected based on his opposition to Obamacare who was outraged that his government health care entitlement did not start until the beginning of the next month after he started his job in Congress.

The cost of health care in the US can easily be reduced from 16-18% of GDP to 12-14% of GDP over the next decade, in part because more people will go from the massively costly private sector coverage for 55-65 to the much lower cost Medicare while the private sector is forced by Obamacare to figure out how to keep costs of the 45-55 age group from increasing much as they become 55-65. And the 25-35 age group will be brought into a system that focuses on managed care so that by the time they become 35-45, they will expect managed care run by experts, not nameless faceless insurance company clerks.

I joined an HMO circa 1980 and it was innovative and very much seeking a partnership with me. It was both data driven and personalized, and because doctors were salaried in teams, consultations were often immediate, and always no hassle. The HMO had significant negative impacts on the local hospitals because the HMO did everything it could to not pay to send patients to the hospital. The HMO setup outpatient clinics for everything they could so the HMO surgeons reduced their use of the hospital a lot. The HMO setup its own critical care to triage the use of the ER and hospital. The HMO had a doctor-pharmacologist who focused only on the most cost-effective drug treatment plans.

The changes being driven by doctors running HMOs scared insurers and hospitals and drug companies so the medical lobbies got Congress to hobble HMOs to allow insurers to compete and to make sure patients were educated to the value of the expensive brand drug over the more effective cheap generic. By the 90s, HMOs were doomed by the laws the medical lobbies got Congress and State legislatures to pass.

After all, with profits being your top priority, you will do the right thing from the free market advocate point of view - drive up the consumer spending on medical goods, more expensive drugs, more expensive surgery in hospitals, more expensive insurance, and lots of obscurity in the delivery and pricing to prevent competition driving down prices. Health care became like soda - flavored water costs ten times the ingredients because you must buy a brand, and both Coke and Pepsi make sure no one is allowed access to sell to you for a lower price.

The idea that for-profit free market will reduce cost is merely clever marketing by MBAs who are fooling everyone into how much they save by spending twice as much.

Because sodastream doesn't exist?

Other than that, your post seems classic libertarian- get rid of the regulations and let the free market bring down costs.

Not to mention Walmart brand sodas..

"Obamacare was fought by Republicans because they saw that it would cut entitlement spending."

Your very first sentence is wrong. Republicans marketed the cuts to seniors because elections are. And in terms of RealPolitik this is more than made up for by Obama claiming that Obamacare actually was a cut to entitlement spending which is laughable.

"His rhetoric about increasing public investments in America’s future has always been contrary to the budgets he has presented, though most of his [detractors] have been unaware of this contradiction."

Give me a break. Just because it has a number and the word "discretionary" in it doesn't make it the same thing. No one in the administration would ever have a budget with 8% across-the-board cuts, in R&D and airport operations. It's an absurd comparison.

ahahaha as if discretionary spending even matters to the fiscal future of the United States

Look, here are the two questions that are the most important for the 21st century:

1. How do you deal with a tidal wave of old people without bankrupting society?

2. How do you provide energy to the world without massive global climate change?

The first question is all about the nondiscretionary budget. And you don't help the second one by cutting the discretionary budget.

Isn't the first one related to the problem of what do you do with the half of workers who are unemployed because the other half of workers produce twice as much as they can consume?

Is this a denominator issue? The claim is that Obama proposed a cut as a percentage of GDP. But GDP keeps coming in below forecast - could be a stagnation or something,

This may not be accurate, but a quick search did not confirm Sachs' contention, at least for 2010 -

Sachs is a leftist. It's easier to lie when you don't have a soul or conscience.

Government $pending breaks down into two types: $pendind on programs that should be done privately, such as airports, etc., and stuff that shouldn't be done at all--Congress, the White House, the Fed, the War Dept. and its six degrees of retainership, the DEA and its drug warriors, the border patrol, etc. The people who do things that should be done in the private sector are New Class parasites. The people who do things that shouldn't be done by anyone are pure public parasites.

Is Sachs using GDP or potential GDP? If he is using GDP will Krugnuts be intellectually consistent and write an article about how wrong it is to use GDP in the denominator? Somehow I doubt Double-Standard Krugman would do such a thing.

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